SF examining using pension funds for housing investment

SF examining using pension funds for housing investment

by Joshua Sabatini, SF Examiner, 5/8/14

San Francisco officials are exploring the use of The City’s pension fund to help finance below-market-rate housing as they look to house more of the homeless population and ease the impacts of a booming real estate market amid a technology-fueled economy.

Although Mayor Ed Lee has established a goal of building 30,000 housing units by 2020 and helped get Proposition C approved in 2012 to help finance housing development with $1.5 billion over 30 years, some say a greater investment is needed for The City to start seeing fewer people living on the streets and lower rents.

Supervisor John Avalos said there is a debate every year about housing needs for homeless people and other residents, but it boils down to a need for increased investment.

That would involve “out of the box” ideas, he said, such as the use of pension funds for boosting housing development, a decision that would ultimately be up to the San Francisco Employees’ Retirement System board, which manages the $13 billion investment fund.

Conversations are ongoing with the Mayor’s Office and members of the board about taking the funds currently tied up in investments yielding low returns and investing them in below-market-rate housing, according to Avalos.

The idea is backed by at least one retirement board member.

“I support investing in San Francisco real estate, both market rate and affordable housing,” board of directors President Victor Makras said. “All of our investments will have to meet our high standards of qualifications.”

Makras said he would be making proposals “in the near future.”

Next week, the board will be asked whether to make a foray into the local real estate market by purchasing a building to accommodate 50,000 square feet for the retirement system department’s office space instead of renting it. A building of that size could cost between $25 million and $35 million.

San Francisco isn’t the only city looking to use pension funds to help address a housing climate of soaring rents, evictions and tenant displacement. New York Mayor Bill de Blasio has proposed using $1 billion of its $150 billion pension fund assets for housing.

Avalos said he is also exploring the creation of a development financial corporation, which could be a way The City could use public dollars to finance housing development.

“Prop. C has been really great for San Francisco, but it has not been enough, especially with the dissolution of [the Redevelopment Agency] and a lot of our funds going towards public housing, which is a key priority,” Avalos said. “But we have to really find ways to bolster our affordable housing investments overall.”